The lake itself ended up this way due an algal bloom caused by chronic eutrophication (an increase in nutrients in a body of water); all life save the algae has died, and a foul stench emanates from the lake, though it certainly looks spectacular.

Efforts to clean the lake have proved futile, and specialists say the only solution may be to get rid of it entirely…

Cultural revolution in China!
Impressionism just reached our lakes.
Such a triumph is compared to Claude Monet early works, like in the painting Impression: Soleil Levant
http://en.wikipedia.org/wiki/File:Claude_Monet,_Impression,_soleil_levant,_1872.jpg

The avant garde movement is truly awakening on cultural China!
Nevermind nature, it's all about THE ARTS!

Most likely from fertilizers utilized by the farmers. The fertilizers run off due to the rain water and enter streams and lakes. This leads to a spike in algal growth due to the increase in levels of nitrogen (including other chemicals essential to plant growth). Then, the algae will absorb all the oxygen in the water as well as block out the sun for other organisms as they cover the surface of the water.

Yes, but then you're under the wrong impression that algae only undergo photosynthesis... all plants undergo cellular respiration as well as photosynthesis. However, photosynthesis requires light, so it happens in the day time. So what happens, is that during the day, oxygen levels would increase, while at night, it would drastically decrease as the algae takes in the oxygen and undergo cellular respiration. Also, as the amount of algae increases, the organisms which feed on said algae would increase rapidly, initially. This would lead to the further depletion of oxygen as these organisms undergo respiration. It would also lead to an increase in the concentration of biological wastes generated by said organisms.

Excessive use of fertilizers causes the nutrients to seep into the water supply and thus increasing the nutrients that algae gets causing an algae growth boom which blocks out the sun light causing vegetation growing at the base of the lake to die out depriving fishes of their natural food which causes them to die and rot increasing the growth of algae.